Articles Q4 09

Thailand’s tobacco crop caters primarily to its domestic market. Thailand Tobacco Monopoly (TTM), which is a state-owned arm of the Ministry of Finance, controls over 70% of the retail cigarette market and buys much of the domestically produced FCV for its manufacturing requirements.

But several thousand tons of burley and oriental tobacco are also produced for export. Thai tobacco exports used to be stronger in the days when there were over 10 exporters, but because of convergence and consolidation, there are now far fewer players.

Three companies dominate the leaf tobacco export industry in Thailand: Alliance One International (AOI), Premium Tobacco (who’s Thai operations were featured in this magazine in 2006) and Adams International Limited (AIL), who are partnered with AOI. Premium concentrates on burley, handling around 8,000 tons annually from a total burley harvest of around 40-45,000 tons. AOI exports about 20,000 tons and TTM takes the rest.

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In Indonesia’s burgeoning and colorful kretek culture, there is no more iconic or innovative company than Djarum.

Djarum has been at the forefront of kretek manufacture and design since 1951, when 10 people started rolling the first Djarum kretek on the floor of a humble workshop in Kudus, the country’s kretek capital, under the hands-on tutelage of the company’s founder, Oei Wie Gwan.

Djarum (the word refers to a gramophone needle) were consistently crafted with skill and passion, and the blend of cloves and tobacco became popular on the streets of Kudus, where Gwan could be found selling his wares.

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With the approach of yet another busy season of leaf tobacco harvesting in China, the tobacco monopoly administrative authorities in coordination with state-run tobacco companies are intensifying efforts to crack down on continuing rampant nationwide illegal trade of leaf tobacco.

In China, tobacco is a government monopoly, and Chinese law provides for the system of state monopoly over tobacco trade. Accordingly, the state levies heavy taxes on the tobacco industry. In particular, the leaf tobacco tax earned from major tobacco-growing regions contributes significantly to the financial revenues of local governments.

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Along with rapid development of China’s tobacco industry, continued formation of big competitive cigarette brand families and further improvement of tobacco varieties, the demand for high-quality cigarette fragrance and flavor has kept growing over recent years, creating broad prospects for future development of the business of cigarette fragrance and flavor production in China.

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Along with continued progress in the development of new technologies for enhancing functionality of cigarette filters and lowering the tar content, some amazing new types of filters are emerging, some of which have been utilized in new cigarette products in China over recent years.

High-end cigarette manufacturers are using some uniquely functional and creative filters with powerful utilities, including the vertical multiple circular column filter, the Taiji composite filter and the multi-layer network filter, all effective in reducing the content of tar and other harmful substances in cigarette smoke, also contribute to anti-counterfeiting efforts and delivering more fragrance cigarette smoke.

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BMJ has established itself as the primary supplier of high quality paper and packaging solutions to the Indonesian industry as well overseas markets such as Vietnam. It has invested heavily in state-of-the-art equipment and quality control system. The company’s second line opened recently, a state-of-the-art paper mill producing consistently high quality products it supplies to most of the major players in the global markets. It has been at the forefront of developments in light kretek and other fast-growing segments in domestic and overseas markets. The company’s growth has been steady and dynamic as it has moved at its own pace to develop and refine its products and processes.

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The Indian leaf tobacco industry has been experiencing some extraordinary and tumultuous times recently. Record high prices in 2008 encouraged farmers to grow more tobacco in 2009 in anticipation of reaping further profits. The tobacco was well fertilized, thanks to earnings from the 2008 crop and the willingness of banks to lend to tobacco farmers because of loan guarantees endorsed by the Tobacco Board.

The optimism has been rewarded by more record high prices paid for another large crop in 2009. But there are some in the industry who, although they are happy for the farmers new-found revenue streams, nonetheless worry that the current upward spiral of prices and production is unsustainable in the long run.

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By Heneage Mitchell

Indonesia’s tobacco industry is a vibrant, growing market. New and innovative products are regularly introduced and the its four principal segments (machine-rolled kretek, machine-rolled light kretek, hand-rolled kretek and white sticks) are probably the most diverse of any cigarette market in the world.

Kretek sales have continued to grow and to outstrip white stick sales. Currently kretek sales account for around 97% of the market.

But Indonesia’s tobacco industry is not immune from the machinations of domestic and international anti-smoking activists or from the impact of legislative and excise initiatives. The industry is facing pressure from many directions, including creeping legislation and restrictions.

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